financial accounting theory （rmit university,craig deegan）--chapter5规范会计理论-概念架构设计为例

Financial Accounting TheoryCraig Deegan,Chapter 5Normative theories of accountingthe case of conceptual framework projects Slides written by Michaela Rankin,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.2,Learning Objectives,In this chapter you will be introduced to the role that conceptual frameworks can play in the practice of financial reportingthe history of the development of the various existing conceptual framework projectsthe various building blocks that have been developed within various conceptual framework projects,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.3,Learning Objectives,perceived advantages and disadvantages that arise from the establishment and development of conceptual frameworksfactors, including political factors, that might help or hinder the development of conceptual framework projectsgroups within society which are likely to benefit from the establishment and development of conceptual framework projects,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.4,What is a conceptual framework?,A coherent system of interrelated objectives and fundamentals that is expected to lead to consistent standards attempts to provide a structured theory of accounting,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.5,Conceptual frameworks as normative theories,Conceptual frameworks provide prescription so they are considered normative theories of accountingprescribes the nature, function and limits of financial accounting and reporting,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.6,Rationale for conceptual frameworks,To develop the practice of financial reporting logically and consistently we need to address such issues as:what we mean by financial reporting and what should be its scope;what organisational characteristics indicate that an entity should produce financial reports;the objective of financial reporting;qualitative characteristics financial information should possess;what are the elements of financial reporting;what measurement rule should be employed,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.7,Rationale for conceptual frameworkscontinued,Proponents argue that without agreement on these issues accounting standards will be developed in an ad hoc mannerlimited consistency between accounting standards in the absence of a conceptual framework,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.8,The building blocks of the conceptual framework,The framework must be developed in a particular ordersome issues need to be resolved before moving on to subsequent building blocksRefer to Figure 5.1 in the text for an overview of the Australian Conceptual Framework,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.9,History of the development of CFs,CFs are under development in a number of jurisdictions including:US, UK, Canada, Australia, New Zealand, International Accounting Standards CommitteeNo standard-setters have developed a complete CFLimited or no progress in recent years,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.10,Development of frameworks of accounting in the US,1961 and 1962 Moonitz, and Moonitz and Sprouse prescribed that accounting practice should be based on current values1965 Grady developed theory based on description of existing practiceled to the release of APB Statement No. 4however accounting profession under criticism for lack of any real framework,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.11,Development of frameworks of accounting in the UScontinued,Led to formation of Trueblood Committee in 1971which produced Trueblood Reportreport outlined 12 objectives of accounting and 7 qualitative characteristics which financial information should possessobjective 1 focussed on information needs of financial statement usersobjective 2need to serve users with limited ability to demand financial information,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.12,Development of frameworks of accounting in the UScontinued,1974 APB replaced by FASB which then embarked on its CF project6 SFACs released from 1978 to 1985Initial SFACs normative in nature, but SFAC No. 5 relating to recognition and measurement largely descriptive of current practicereceived much criticism,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.13,Development of a CF in Australia,Degree of progression has also been slowto date only 4 SACs have been releasedSAC 1: Definition of the Reporting EntitySAC 2: Objectives of GPFRSAC 3: Qualitative Characteristics of Financial InformationSAC 4: Definition and Recognition of the Elements of Financial Statements,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.14,Development of a CF in Australiacontinued,Fifth SAC relating to measurement issues is yet to be releasedhas a number of similarities to the US CF project,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.15,Development of a CF in the UK,Early moves towards guidance relating to objectives and identification of users provided by The Corporate Report (1976)concerned with addressing the rights of the community in terms of their access to financial information (broader than notion of users adopted in other frameworks)ultimately contents generally not accepted by the accounting profession,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.16,Development of a CF in the UKcontinued,1991the ASB adopted the IASCs CFIASC framework is generally consistent with the US and Australian frameworks,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.17,Building Blocks of the CF,Building blocks of the various CFs have addressed:definition of the reporting entityobjectives of general purpose financial reportingperceived users of GPFRsqualitative characteristics that GPFRs should possesselements of financial statementspossible approaches to measuring the elements,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.18,Definition of the reporting entity,The Conceptual Framework provides a definition of entities required to produce general purpose financial reports (GPFRs)known as reporting entities,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.19,General purpose financial reports,GPFRs are defined as reports:intended to meet the information needs common to users who are unable to command the preparation of reports tailored so as to satisfy, specifically, all of their information needs (SAC1: para. 6)GPFRs are reports that comply with accounting standards and other GAAP,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.20,Special purpose financial reports,special purpose reports are provided to meet the information demands of a particular user, or group of users,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.21,Entities required to produce GPFRs,Not all entities are classed as reporting entitiesSAC 1 states that GPFRs should be prepared when there are users:whose information needs have common elements, and those users cannot command the preparation of information to satisfy their individual information needs (para. 8),Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.22,Factors indicative of a reporting entity (SAC 1),Separation of management from those with an economic interest in the entitythe economic or political importance/influence of the entity to/on other partiesthe financial characteristics of the entity,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.23,Objectives of GPFR,Traditional objective was to enable outsiders to assess the stewardship of managementrecent commonly accepted goal of financial reporting is to assist report users economic decision makingless emphasis placed on the stewardship function,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.24,Objective embraced within CFs,Objective of GPFRs in SAC 2 is deemed to be:to provide information to users that is useful for making and evaluating decisions about the allocation of scarce resourcesobjective of decision usefulness calls into question usefulness of historical cost information,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.25,Other objectives of GPFRs,Another objective is to enable reporting entities to demonstrate accountability between the entity and those parties to which the entity is deemed accountableaccountability is defined as:the duty to provide an account or reckoning of those actions for which one is held responsibleaccountability is not generally embraced by CFs,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.26,Users of financial reports,SAC 2 identifies three primary user groups for GPFRs:resource providersemployees, lenders, creditors, suppliers, investors and contributorsrecipients of goods and servicescustomers and beneficiariesparties performing review or oversight functionparliaments, governments, regulatory agencies, analysts, labour unions, employer groups, media and special interest groups,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.27,International perspectives on users of GPFRs,US SFAC 1:main focus is present and potential investors and other users with either a direct financial interest or related to those with a direct financial interestUK The Corporate Report: all groups impacted by an organisations operations have rights to information about the reporting entity, not necessarily related to resource allocation decisions,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.28,Level of expertise expected of financial report readers,Generally accepted that readers are expected to have some proficiency in financial accountingSAC 3 (para. 36):GPFRs ought to be constructed having regard to the interests of users who are prepared to exercise diligence in reviewing those reports.,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.29,Qualitative characteristics of financial reports,To ensure financial information is useful for economic decision-making we need to consider the attributes or qualities that financial information should have:primary qualitative characteristics are relevance and reliabilityrelated to relevance is materialitysecondary characteristics include comparability, uniformity, consistency and timeliness,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.30,Reliability,Information is considered to be reliable if it faithfully represents the entitys transactions and eventsshould be free from bias and undue errorreliability is a function of representational faithfulness, verifiability and neutrality,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.31,Reliabilityimplications for traditional accounting,Traditionally, the doctrine of conservatism has been adoptedbias towards understating asset values and overstating liabilitiesthis doctrine is not consistent with notions of reliability or freedom from bias,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.32,Relevance,Something is relevant if it influences decisions on the allocation of scarce resourcesif it is capable of making a difference in a decisionfor information to be relevant it should have predictive value, andfeedback value,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.33,Materiality,A limiting factor on the disclosure of relevant and reliable material is the notion of materiality an item is material if (SAC 3, para. 28): . omission, misstatement or non-disclosure of an item of relevant and reliable information could affect decision-making about the allocation of scarce resources by the users of a general-purpose financial report of an entity,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.34,Secondary characteristics uniformity and consistency,Uniformity and consistency imply advantages in restricting the number of accounting methods that can be used by reporting entitieshas been argued that firms adopt particular accounting methods because they best reflect their underlying performancerestricting available methods impose costs on reporting entities,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.35,Secondary characteristics costs vs benefits,Need to consider whether the cost of providing certain information exceeds the benefits to be derived from its provisioncosts include collection, storage, retrieval, presentation, analysis and interpretationbenefits come from sound economic decision making by usersmeasuring potential costs and benefits involves professional judgement,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.36,Can GPFRs provide unbiased accounts of performance?,The practice of accounting is heavily reliant on professional judgementprior to accounting standards being released, standard setters attempt to determine the economic consequences of following the standardsif consider economic consequences then standards cannot be considered objective or neutral,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.37,Can GPFRs provide unbiased accounts of performance? cont.,If we accept the notion that preparers will be driven by self-interest (from Positive Accounting Theory) notions of objectivity or neutrality are unrealisticpolitical nature of standard setting process also affects neutrality and objectivityIn communicating reality accountants construct reality (Hines 1988),Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.38,The elements of financial reporting,The next building block considers the definition and recognition criteria of the elements of financial reportingdefinition criteriawhat attributes are required before an item can be considered as belonging to a particular class of elementrecognition criteriaemployed to determine whether the item can be included in the financial reports,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.39,Five elements of financial reporting in Australia,Assetsliabilitiesequityexpensesrevenues10 elements identified in the US by FASBIASC adopts the five Australian elements plus income,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.40,Definition of Assets,future economic benefits controlled by the entity as a result of past transactions and other past events (SAC 4, para. 14)Three key characteristics:must be an expected future economic benefitthe reporting entity must control the future economic benefitthe transaction or other past event giving rise to the reporting entitys control must have occurred,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.41,Definition of Assetscontinued,The definition refers to the benefit and not its sourcein the absence of future economic benefits, the object or right will not qualify as an assetthe benefits can result from ongoing use, not necessarily a value in exchange,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.42,The characteristic of control,control relates to the capacity to benefit from the asset and to deny or regulate others access to the benefitlegal enforceability is not a pre-requisite for establishing the existence of controlcontrol (and not legal ownership) is required, although controlled assets are frequently owned,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.43,Recognition of assets,An asset shall be recognised when:it is probable that the future economic benefits embodied in the asset will eventuate; andthe asset possesses a cost or other value that can be measured reliably (SAC 4, para. 38)probable is defined as more likely rather than less likely (SAC 4, para. 40),Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.44,Definition of liabilities,Liabilities are defined as future sacrifices of economic benefits that the entity is presently obliged to make to other entities as a result of past transactions or other past events (SAC 4, para. 48)present obligations not only refers to legally enforceable obligations but also those imposed by notions of equity and fairness, or by custom or other business practices,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by Deegan,5.45,Recognition of liabilities,Recognition criteria consistent with those of assetsa liability shall be recognised when:it is probable that the sacrifice of economic benefits will be required; andthe amount of the liability can be measured reliablyhas implications for disclosure of various provisions,Copyright 2000 McGraw-Hill Book Co. Aust. PPT t/a Financial Accounting Theory by D